Manufacturing: Raw materials, energy push costs; capital spending up

Raw material and energy costs headed the list of manufacturing cost concerns, according a recent survey, though the spending outlook seems positive.

02/22/2008


Chicago – Raw material and energy costs headed the list of cost concerns, according to nearly 100 respondents to a survey conducted in January 2008.

Prime Advantage

, a buying consortium for small and midsized manufacturers, polled its members on issues that will shape their economic plans this year and released its findings. Economics can influence automation customers, manufacturers, and system integrators.

Respondents to the

Group Outlook Survey for 2008

included business owners, vice presidents of procurement, and purchasing directors throughout North America. Forty-six percent of respondents agreed that costs of raw materials (stainless steel, nickel, copper, and other metals and plastics) were a major concern in 2008. Energy costs were next at 17.5%, and logistics and supply chain costs followed at 16.4%. Other concerns included inflation (8%), labor (4%), foreign competition (3.4%), overhead (2.8%), and healthcare (1.7%).

Prime Advantage president and founder Louise O’Sullivan said, “More than rising energy costs or inflation, the uncertainty around pricing pressures for raw materials continues to be an obstacle to success for many small and mid-sized manufacturers. However, the survey also noted a positive outlook for revenue expectations and hiring, with 59% indicating a revenue boost.” Just 1% indicated that job cuts could occur in 2008, while 23% plan new hires, and 76% plan to keep the current employee base at the same level as 2007, she said.

The survey reported that 66% of members plan significant capital improvements in 2008, including equipment upgrades such as press brakes and turret punch presses, plus equipment for laser cutting, robotic welding and stamping. This is supported by findings from the Business Roundtable’s CEO Economic Outlook survey for fourth quarter 2007, in which CEOs predicted a 35% increase in capital spending over the first half 2008, said O’Sullivan.

Also, 88% survey respondents indicate planned efforts to improve at least one of the following in 2008: cost savings, efficiency measurements, or supplier diversity goals. Another 11% will address IT systems improvements, including investments in new applications, data visibility, and data accuracy, while 2% plan investments in industry certifications or education.

When it comes to managing or containing raw materials costs, Prime Advantage gives its clients an edge, says O’Sullivan. “As a buying consortium, we’ve been successful in addressing that exact concern. Since its inception, Prime Advantage has returned more than $60 million in rebates and discounts to its members; these are real savings that are helping U.S. manufacturers gain a powerful competitive advantage in the face of growing international competition,” she said.

Expected 2008 cost increases for small, mid-sized North American manufacturers

Healthcare 1.7%
Overhead 2.8%
Foreign Competition 3.4%
Labor 4.0%
Inflation 8.0%
Logistics/Supply Chain 16.4%
Energy 17.5%
Raw Materials 46.0%
Source: Prime Advantage Group Outlook Survey 2008

Control Engineering News Desk
Register here and scroll down to select your choice of eNewsletters free .





No comments
The Engineers' Choice Awards highlight some of the best new control, instrumentation and automation products as chosen by...
Each year, a panel of Control Engineering editors and industry expert judges select the System Integrator of the Year Award winners.
Control Engineering Leaders Under 40 identifies and gives recognition to young engineers who...
Learn more about methods used to ensure that the integration between the safety system and the process control...
Adding industrial toughness and reliability to Ethernet eGuide
Technological advances like multiple-in-multiple-out (MIMO) transmitting and receiving
Virtualization advice: 4 ways splitting servers can help manufacturing; Efficient motion controls; Fill the brain drain; Learn from the HART Plant of the Year
Two sides to process safety: Combining human and technical factors in your program; Preparing HMI graphics for migrations; Mechatronics and safety; Engineers' Choice Awards
Detecting security breaches: Forensic invenstigations depend on knowing your networks inside and out; Wireless workers; Opening robotic control; Product exclusive: Robust encoders
The Ask Control Engineering blog covers all aspects of automation, including motors, drives, sensors, motion control, machine control, and embedded systems.
Join this ongoing discussion of machine guarding topics, including solutions assessments, regulatory compliance, gap analysis...
News and comments from Control Engineering process industries editor, Peter Welander.
IMS Research, recently acquired by IHS Inc., is a leading independent supplier of market research and consultancy to the global electronics industry.
This is a blog from the trenches – written by engineers who are implementing and upgrading control systems every day across every industry.
Anthony Baker is a fictitious aggregation of experts from Callisto Integration, providing manufacturing consulting and systems integration.
Integrator Guide

Integrator Guide

Search the online Automation Integrator Guide
 

Create New Listing

Visit the System Integrators page to view past winners of Control Engineering's System Integrator of the Year Award and learn how to enter the competition. You will also find more information on system integrators and Control System Integrators Association.

Case Study Database

Case Study Database

Get more exposure for your case study by uploading it to the Control Engineering case study database, where end-users can identify relevant solutions and explore what the experts are doing to effectively implement a variety of technology and productivity related projects.

These case studies provide examples of how knowledgeable solution providers have used technology, processes and people to create effective and successful implementations in real-world situations. Case studies can be completed by filling out a simple online form where you can outline the project title, abstract, and full story in 1500 words or less; upload photos, videos and a logo.

Click here to visit the Case Study Database and upload your case study.